Some buildings touched by the alleged bribery scheme now blight neighborhoods they were supposed to help revive. Neighbors say the house at 224 Spencer St. in Brooklyn has been in this state for more than a year. Alice Brennan/The New York World

Wendell Walters, 49, appeared in federal court this week to face charges of bribery, corruption and fraud. He is alleged to have accepted at least $600,000 in bribes and kickbacks from developers and contractors seeking access to affordable housing programs at the Department of Housing Preservation and Development, where he served as an assistant commissioner.

When Walters and six developers and contractors who were connected with the programs he ran were arrested two weeks ago, the agency’s commissioner Mathew Wambua emphasized that the charges against Walters were exceptional. “I do not view the actions of this individual as representative of the great work the agency does, day-to-day, in carrying out the nation’s largest municipal affordable housing plan,” Wambua said in a statement.

Yet the prosecutors’ case — which seeks to recoup $22 million from the defendants — suggests that corruption infected numerous Housing Preservation and Development programs Walters ran. One initiative overseen by Walters, called the Neighborhood Entrepreneurs Program, was once honored by Harvard’s Kennedy School as one of the nation’s best innovations in government.

Court transcripts show a subcontractor in one program run by Walters confessed to grossly underpaying workers on federally financed housing construction. Contractors purportedly billed the Department of Housing Preservation and Development as if the workers were paid $60 an hour, as required by federal law; instead, the workers received just $12 or $15 an hour for their labor. Prosecutors charge that Walters received more than $400,000 in bribes over a six-year period from the contractor in charge of those jobs. (Walters earned $135,000 salary in 2009 from the city agency.)According to published reports, Walters awarded more than $10 million in work to that contractor.

The impact of the alleged criminal activity is especially vivid on the streets of Bushwick and Bedford-Stuyvesant in Brooklyn, two low-income neighborhoods the department’s programs sought to assist. Under the HomeWorks program, overseen by Walters, developers were supposed to take vacant city-owned buildings and sell them to new homeowners. But in one of those projects — the three-story brick townhouse at 53 Rochester Ave. in Bushwick — thieves have torn through immaculately painted walls in search of copper and pipes to sell. Once-polished floorboards jut out dangerously, splintered and cracked.

“This building makes me feel sad,” said neighbor Egon Hanson as he ran his hands over a dusty window sill at 53 Rochester Ave. “They spend all this money fixing it up, and now…it’s a carcass.” At 224 Spencer St., the building is wrapped in white-and-blue paper siding, making it look like a present that was never gifted. Neighbors say the house has been in this state for more than a year.

Walters’ attorney, Howard Leader, told The New York World his client was not guilty and would fight the case.

Two Guilty Please

Through the program, the city selected small, local entrepreneurs to carry through its projects, seeking to stimulate the economies of low-income neighborhoods by using local labor and businesses. The entrepreneurs planned and oversaw the rehabilitation and design of the buildings, and were assigned to recommend general contractors to the Department of Housing Preservation and Development for approval.

The program continues to function, but with just 18 of the 788 buildings left to complete, it’s nearing its end. Most of the projects have been completed and are now occupied, but some buildings touched by the alleged bribery scheme now blight neighborhoods they were supposed to help revive.

The case against Walters and the other six defendants hinges on accounts by two men identified in court filings as “John Doe #1” and “John Doe #2,” contractors who attested to paying bribes to Walters and other defendants. Both pleaded guilty on Oct. 5 to charges of racketeering conspiracy, bribery, wire fraud conspiracy and money laundering. That case has been sealed.

Their names have been withheld because they are cooperating witnesses in the Walters case. But details in the FBI’s search warrant of Walters’ home and office, combined with property records, real estate advertisements and building permits, reveal that John Doe #2 is George Armstrong, the former head of the New York City Housing Partnership. The Housing Partnership, an affiliate of the business group Partnership for New York City, worked with the Giluliani administration to create the Neighborhood Entrepreneurs Program as a centerpiece of the administration’s housing program.

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